People will pay a premium for something they value. In that instance I actually won out eventually. It turns out the agency was really shitty at managing projects and that particular client got in touch with me directly. He agreed to pay me $400/hr if I gave him priority. I did, and he started referring me to other businesses who would also pay that rate.
So don't kid yourself about how much people will pay.
Edit: These clients weren't in the Bay Area.
If you're willing to get someone to pay you 400/hr, I bet you're not billing/marketing yourself as a developer.
And I'm not kidding myself. Most companies know they can get good devs for significantly less than 400/hr.
The naive answer I would have given at time was: "I'm a software developer who builds ecommerce and CMS sites."
And it's funny that you ask "What do you do?" At the time I had starting taking on projects from a friend who had been doing development contracting for about 4 years. One time when a client told me my proposal was priced too low and passed on my bid I was baffled.
I told my friend about it and he asked me the same question, and I gave the above answer more or less. He corrected me and said "No! You're businessman enabling a national sales channel for a local or regional business who wants to increase their revenue."
So never define your price by what you do, rather define it by what the value of thing is you're delivering to the client. This requires some research on your clients and a realignment of your thinking. When you're contracting as a developer, you have to start considering yourself as becoming a successful businessperson and not (just) a successful software engineer.
I started charing on a per week and per month basis, which was good because I stopped getting bothered with tiny projects.
Also I could choose how much hours per week I was willing to work, as long as the clients are happy they don't care if it took me 40 hours that week or 20. This also increased my effective per hour payment and my work life ballance.
It is also important to sell yourself with a higher value proposition. If you say "I'm a freelancing front-end dev who does JavaScript" they won't pay you as good as when you say "I'm a mobile consultant, who designs and implements apps", even if you do basically the same thing, people suddendly realize that you are a specialist and not some code monkey...
You can get a great dev for much, much less than $400/hr. You're right. However, should I charge less than that to do a few hours of work for you? Absolutely not.
If I'm doing a small project for a few hours for you I have to charge a lot to cover the business costs.
Nope. It is close to what I just paid a plumber. The plumber wanted $5000 for 16hrs of work to redo my piping ~$300/hr. (The cost materials: plastic PEX was probably $40, small house a one guy job). Remember this is a residential plumber - not a commercial electrician. WHY SO EXPENSIVE? You might ask? Try outsourcing my plumber.
I had my plumber fix a pipe that broke inside the foundation for a $1100. And that involved 8 hrs of 4 guys digging a long and deep ditch, as well as chiseling out foundation.
It's really really hard to get people right now. As bad as I've ever seen it.
Yes, you will pay a premium. If you can stretch it to 1k hours or 6 months, you will be able to get cheaper prices. I doubt you'd be paying over $200/hr.
As a one-person shop the value you can bring is probably lower because you don't have the synergies of a team and you will have to spend some of your time doing junior BA-type work. You can't charge yourself out at the full rate of an architect-level resource because you're not spending all your time doing architect-level work. However as a one-person shop your overhead should be lower (e.g. no HR people or other cost centers to support with your billings).
$75/hour seems awful low as a 1099/consultant, so it's no wonder businesses are happy to pay that.
I think I'd find it impossible to charge more than $200/hr for embedded firmware (Boston), but could probably get $400/hr for systems engineering or industrial design to develop an integrated complex solution to a business problem that they don't have the in-house expertise to deal with.
If, as a contractor, you are professional, easy to get a hold of, and treat your work seriously you'd be invaluable to any company who could hold onto you and a lot of hiring managers secretly know this.
And then there's the question of why hire a contractor in the first place if you already have a strong team of devs — why not just hire another full-timer? Most likely you're having trouble filling out your team or filling a crucial role. That would probably be worth a little extra to you.
Plus, there are tons of companies out there who don't need a full dev team of a dozen people, but know they could benefit a lot from hiring contractors for 3 months at a time for one-off projects. These companies are more than willing to pay a little extra to get a job done well on short notice.
Probably raising my rate to $350 soon.
Most of my inbound comes through referrals. I've been at this for about 8 years, so my referral network is pretty healthy. First few years were rough though!
In general, the real "trick" to a successful network (as least for me) is just to be friendly and do good work. Lots of coffee meetings, phone calls, and lunches. :)
Most people who are referred to me know what I charge, so there's not much haggling. People want results and I have a reputation for delivering them.
Assuming you have a creative, a project manager, delivery manager, and a sales manager in the agency, each task/project has to go through each of their hands.
That's an hour each for the managers and how ever many hours for the actual work itself as the base delivery price. Then the internal back and forth between the delivery manager and the creative to insure that everything is "to spec". Then the project manager to report on status each day and the sales manager to take you to lunch and discuss the how amazing everything is with the project, and that the BEST people are working on it.
So 3-4 hours of work can turn into 20 hours of billing (plus expenses).
I also know they want all the work you can throw at them, but just getting a sense of whether this is a 1 hour or 5 hour gig so I can evaluate the ROI before briefing it in is impossible.
This is one of the things I want to address (my side-gig doing marketing consultancy) - one rate, whether that's strategy or design work, up to the client how to use it (and telling them to use someone else if not good value).
Different companies are wildly more efficient per hour of work never mind that many just do much better work.
Rates are kind of ethereal. Maybe they are padding. Maybe they are just slow. Maybe they are throwing several resources on it. I don't know.
This is a big problem with procurement. People fixate on hourly costs and not total cost of project.
That seems pretty good to me for Houston.
As for the hourly rate, I would always accept more but have no real complaints. Getting back to the original post that made me comment, 240/hr for a freelance web designer seems unrealistically high, especially in Houston. I dont know the market well enough in other parts of the country though.
But suffice it to say, if I went out on a gig that was being billed at $200.0 / hr, I wasn't making anywhere close to $200.00 / hr personally.
That's not a custom dev rate, that's a you have a track record of doing something very niche and valuable and usually domain specific. I.e. you have a portfolio or set of recommendations that you delivered successful financial plug-ins for oil and gas ERP systems.